According to the Liquidity Premium Theory, the Expected Yield on a Two-Year

question 36

Multiple Choice

According to the liquidity premium theory, the expected yield on a two-year security will ____ the expected yield from consecutive investments in one-year securities.

• A) equal
• B) be less than
• C) be greater than
• D) B and C are possible, depending on the size of the liquidity premium

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Definitions:

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